Viewing blog posts written by Dorothy Rothrock

Pay attention to manufacturing in the climate debate

In the wake of the Legislature passing new climate change bills this week, Governor Brown was asked about the impact on jobs. Part of his answer was “Manufacturing has been declining as a part of the American workforce for decades, and the decline in America generally is very similar to California.”

Manufacturing is actually thriving in the United States. Companies are increasingly choosing to relocate to the US due to wage growth in developing countries, logistical concerns, and poor intellectual property protection outside the US. It’s a good thing, too, because the direct jobs and ripple effect of manufacturing in the broader economy makes the US a powerhouse nation. A recent study by the MAPI institute showed that each manufacturing job supports a whopping 3.4 other non-manufacturing jobs.

While the US as a whole is becoming more attractive to manufacturing than in prior decades, we have work to do in California. CMTA tracks manufacturing jobs and investment data in California compared to other states. Since the recession ended in 2010 we have seen only slow job growth in California while other states are enjoying the boom. In 2015, California had the lowest rate of all states for manufacturing investments for expansions or new sites. We haven’t received more than two percent of total US investments since the year 2000. That is far short of the 11 percent we need to attract each year to maintain our share of US manufacturing GDP.

It’s impossible to attribute any single state policy, even a big one like climate change, to any particular job growth or loss. Many costs of doing business, litigation risks, and permitting challenges discourage investment and job creation in California. But that shouldn’t give lawmakers a pass to not consider economic impacts when they adopt climate change policies. This is especially true when success depends on other states, who want to preserve their strong manufacturing economies, being willing to adopt similar policies and making meaningful reductions in global climate emissions.

California voters support climate change laws but also want to protect manufacturing. In a recent poll by the California Business Roundtable, when asked if they support new climate change regulations the answer is a resounding “yes.” But when asked if they would support these policies if middle-class manufacturing jobs would be lost, 66 percent said they opposed.

Reasonable regulations can be developed to achieve both environmental and economic goals for California. Manufacturing jobs in California produce greener and cleaner products for the world. It’s good policy and good politics to make sure manufacturing, in particular, is part of the climate change agenda.

Innovation in manufacturing can improve sustainability

A blog cross posted from the National Association of Manufacturers and Mallory Micetich:

Here’s a great example of how innovation in manufacturing can improve sustainability and our world. Exxon Mobil is investing in FuelCell Energy, a company developing technology that could reduce carbon dioxide emissions from power plants. As the New York Times reports, Exxon Mobil hopes that their relationship with FuelCell will allow them to take a promising new approach to carbon capture and sequestration “from the lab to the market.” This technology could potentially mean that power plants could “isolate and compress” CO2 “while producing enough power to more than make up for the energy cost of capturing the carbon.”

Read more about how FuelCell and Exxon Mobil’s partnership could help power plants reduce emissions.

Californians deserve better MFG information around SB 350

The "myths and facts" document created by the State Senate Democrats in support of SB 350, a bill that mandates 50 percent reduction in petroleum use, 50 percent use of renewable power and doubling energy efficiency in buildings by 2030, cherry picks data and chooses arbitrary timeframes to turn reality on its head. We can have a healthy debate about climate policy, but we must first put some perspective to these claims.

One "myth" the document claims to dispel is that “SB 350 will kill California’s manufacturing industry." To ‘prove’ this point, the document highlights the size of California’s manufacturing economy and picks statistics for jobs, output and exports to prove manufacturing is flourishing under current climate policies, such as AB 32, and would do even better with SB 350.

They claim the sheer size of the California manufacturing economy proves that these policies are a positive for the state. However, it should be no surprise that the most populated state in the nation also happens to have a large manufacturing employment, production and export base. On a per capita basis, a more rational way to understand manufacturing’s role in our economy, the story is different. “California has twice as many manufacturing companies as Texas,” might be factually true, but California has still has the same per capita manufacturing jobs as Texas – one for every 29 people.

Second, while we are still the country’s largest manufacturing state there has been a shift away from California in recent years. Since the end of the recession in 2010 manufacturing jobs have only increased in California by 2.8 percent while the U.S. has grown its manufacturing base by 7.8 percent – that’s more than 200 percent greater manufacturing growth outside California.

In that same time period, we attracted less than two percent of the country’s new manufacturing investments. The result of these disturbing trends is that since 2009 U.S. manufacturing output has grown by a healthy 22 percent while California’s output has been lagging with only 11 percent growth.

Finally, we wonder why the State Senate Democrats trust the Manufacturing News Index (MNI) to count jobs rather than the Bureau of Labor Statistics (BLS) that is relied on by California’s own employment agencies. MNI uses outdated Standard Industrial Codes and includes more types of companies in their analysis (mining, extraction, among others) than does BLS. According to BLS, we grew manufacturing jobs by 0.4 percent which is far behind the 1.6 percent US growth for the period March 2014 to March 2015.

Policies that increase energy and transportation costs on manufacturers will encourage further declines in employment, investments and manufacturing output. We’re glad the State Senate cares about California manufacturing and we hope these facts about manufacturing will lead to smart policies going forward to reduce burdens and maintain affordable energy supplies.

A growing MFG economy would be a powerful message for CA climate change leadership

I enjoyed speaking on a climate change panel this week hosted by the Public Policy Institute of California (PPIC). The topic is important to manufacturers because they are sensitive to high energy costs, and we can expect ever higher energy costs when state climate change rules go into full effect.

Other states are watching to see if the manufacturing economy in California will be hurt under our strict greenhouse gas reduction rules. They won’t jump on board until they believe it will be good for their economies. That matters because we could take every single molecule of carbon out of the California economy and climate change would still happen. The climate will improve only if other states and countries adopt significant reduction polices.

My fellow panelists expressed great enthusiasm about our state’s leadership role in this global issue but they downplayed facts on the ground about the state’s economy. The state is seriously lagging the US in manufacturing job growth since the recession ended. We also have very weak levels of investments for new sites or expansions. Energy costs play a big part in making California a tough place to be a manufacturer.

I understand the desire to put a positive spin on the climate change story and only make the story about technology advancements and growth in green jobs. It interrupts a glowing narrative to mention the trade-offs -- potential loss of high wage, middle class manufacturing jobs -- when we indiscriminately add new costs to the economy. Some groups do not want to raise public awareness about the trade-offs and thereby dampen enthusiasm about addressing climate change.

But if manufacturing continues to suffer in California, other states will be reluctant to adopt similar policies. The states we need to convince have vibrant manufacturing economies with middle class jobs that they do not want to lose. Brushing the manufacturing data under the rug is not fooling anyone outside California – in fact, those state leaders see our failure to acknowledge the economic truths as one more reason to put California in the “kooky” category and shy away from joining our programs to reduce emissions.

A question that should have been asked at the PPIC event was “How can California inspire other states and countries to adopt our policies to reduce climate emissions?” My answer would have been: “Don’t deny the costs of the policies, take action to minimize those costs, and then make a commitment to prove with facts and data that a healthy manufacturing economy is, and will be, supported by our climate change policies.”

That approach has a chance of putting California in a true leadership position on climate change.

California energy: Evaluate how it all works together and grow our economy

Manufacturers can help the state meet its bold environmental goals if regulations are cost-effective and technologically feasible. We are fighting for these principles to apply in the effort to reduce greenhouse gas emissions to meet the current target in 2020. Now the state is beginning to discuss very aggressive “near-zero emission” targets beyond 2020 on the road to 2050. The more stringent the targets, the more difficult it will be to manage costs through installation of available technology. Unrealistic goals would impact every part of the economy, cost hundreds of billions of dollars in private and public money, and hurt the California manufacturing sector that now employs 1.3 million workers.

This week economist Dr. Robert Stavins of Harvard University made the rounds in Sacramento to encourage lawmakers to include the following criteria in development of polices for California's post-2020 climate change endeavors:

1. Medium term target: Maintain flexibility to adjust to new information about benefits, costs and scope of action by other nations/states.

2. Make target conditional on action by other nations/states: Create incentives for other nations/states to take action, and avoid outcomes in which California incurs costs without any real environmental benefits.